FORM 20-F/A Brookfield Property Partners L.P. - Brookfield Asset ...

(d) Partnership EquityOn completion of the reorganization and spin-off, partnership equity will include the general and limitedpartnership units in the company and the Redeemption-Exchange units of the property partnership.In connection with the reorganization, the property partnership will issue Redemption-Exchange units toBrookfield that may, at the request of the holder beginning two years from the date of closing of the spin-off,require the property partnership to redeem all or a portion of the holder’s units of the property partnership forcash in an amount equal to the market value of one of the company’s units multiplied by the number of units tobe redeemed (subject to certain adjustments). This right is subject to the company’s right of first refusal whichentitles it, at its sole discretion, to elect to acquire any unit so presented to the property partnership in exchangefor one of the company’s units (subject to certain customary adjustments). The Redemption-Exchange units havebeen presented as partnership equity in the unaudited pro forma balance sheet as they do not entail a contractualobligation on the part of the company to deliver cash and can be settled by the company, at its sole discretion, byissuing a fixed number of its own equity instruments.Equity in net assets attributable to parent company in the Brookfield Carve-out financial statements has beenpresented as partnership equity in the unaudited pro forma financial statements to reflect the impact of thereorganization and spin-off. Income attributable to parent company in the Brookfield Carve-out financialstatements has been presented as net income attributable to partners in the pro forma statement of income andadjusted for the impact of the dividends on preferred shares issued by the Holding Entities.(e) Tax Impacts of ReorganizationThe reorganization will impact the effective tax rate of the Business as the Holding Entities through which thecompany will hold the Business are different from those through which it was historically held by Brookfield,and result in the issuance of certain inter-company debt between the property partnership and the HoldingEntities.The aggregate impact of the reorganization on income tax expense in the pro forma statements of income, givingeffect to certain elements of the reorganization that were completed in the first quarter of 2012 as though theyoccurred on January 1, 2011, is a decrease of $22 million and an increase of $403 million for the three monthsended March 31, 2012 and the year ended December 31, 2011, respectively. The aggregate impact of thereorganization on the deferred tax liability in the pro forma balance sheet is an increase of $150 million as atMarch 31, 2012.(f) Management FeesThe pro forma statements of income reflect a charge of $12.5 million for the three months ended March 31, 2012and $50 million for the year ended December 31, 2011, respectively, together with the associated tax effects of$3.4 million and $13.6 million, respectively, representing an estimate of the annual management fee that wouldbe paid by the company to a subsidiary of Brookfield for services rendered in connection with a Master ServicesAgreement to be entered into in connection with the reorganization and spin-off. The estimated ManagementFees are based on an annual base management fee of $50 million (subject to an annual escalation by a specifiedinflation factor beginning on January 1, 2014).The property partnership will also pay a quarterly equity enhancement distribution to the Property GP of0.3125% of the amount by which the company’s total capitalization value at the end of each quarter exceeds itstotal capitalization value determined immediately following the spin-off. As this is based on the futurecapitalization value of the company, which cannot be reliably estimated, the expense associated with the equityenhancement distribution has not been included in the pro forma statements of income.This adjustment does not reflect public company costs which management expects will be approximately$5 million per year.PF-10